When former President Trump in October 2021 agreed to merge his fledgling social media company with a SPAC, it made tons of sense.
Fifteen months later, with the deal mired in legal and regulatory limbo, it would make sense for both sides to walk away, Axios reports in its Pro Rata newsletter.
Truth Social is the presumptive Republican nominee’s primary medium for written communication, as he hasn’t returned to Twitter despite being reinstated by Elon Musk.
There’s also been a lot of money at stake.
The acquiring SPAC, Digital World Acquisition, at one point had around a $3 billion market cap, while outside investors originally committed $1 billion to support the merger.
Truth Social was still months away from launch in October 2021, let alone generating revenue or installing a management team. Merging with DWAC would help Trump capitalize his company without spending much of his own money, as has been his wont.
Shortly after the merger was announced, the New York Times reported that DWAC’s CEO and Trump had discussed a potential merger before DWAC itself went public — which could have violated federal securities laws. Soon there was an investigation by the U.S. Securities and Exchange Commission, and then by the U.S. Justice Department.
All DWAC directors received subpoenas by last July for a federal grand jury in New York.
This left the merger hanging, unable to receive SEC approval to proceed. DWAC did manage to secure an extension through to this September, but around a quarter of the $1 billion in PIPE financing has already dissipated.
Truth Social’s growth has been minimal. Trump’s following on the platform is just 6% of the audience he once commanded on Twitter.
There’s talk that Truth Social has considered the idea of being acquired by someone else, such as its strategic partner Rumble, but thus far it doesn’t appear to be too serious.
For Truth Social to grow, it needs investment. But that seems increasingly unlikely to come from DWAC, given the molasses-like speed at which the legal investigations are proceeding. And it’s DWAC that might be in legal hot water, not Truth Social.
